Oil

The number of bankruptcies in the US shale oil business continues to grow, and the price of a barrel has been grinding higher. On the face of it this is good news for Saudi Arabia and Russia, who both desperately want the price back up in the 70s - 80s at least, but it is unlikely to happen I'm afraid. Those oil fields remain discovered, and a bankruptcy allows the writing off of the old debt, and potentially a new company to rise from the ashes, buy out the existing assets at a knock down price and start pumping - hopefully with less debt and more equity in the mix. 

In the near future I can't see oil going back down to 30, but at the same time I can't see it rising much either.

And at the same time cheap petrol has delivered a boost to consumers - see today's retail sales and car sales data for the US and Germany for evidence. Cheap oil is turbocharging the effects of QE. 

Over the next 5 years the West and Asia will benefit from sustained low prices at the expense of Russia, the Middle East and Venezuela. Beyond that, who knows - maybe we'll all be driving electric, solar or fuel cell cars. Or they'll be driving themselves.

Brexit

I don't really think it's going to happen but you never know.

Either way I'd suggest Sterling will bounce - so much bad news has been priced in that I can't believe it can go much further, and as it is the weakness will help the UK economy as soon as the uncertainty is over.

It's far from perfect, but the UK is the best performing economy in Europe, with low inflation, low unemployment and a budget deficit that is slowly being ground down. I'd rather own that than France, Italy or government less Spain. The only alternative is Germany, and that's locked into paying for the errors of the other members of the Eurozone.

Saudi Arabia

Too little, too late. "Unconventional" oil and gas has changed everything permanently. Oil won't be going back to $100 a barrel in a hurry, and the Saudis in particular are in real trouble as a result. They should have put money away in the good years, now they are trying to do it when it's tough and getting tougher. There's talk of a partial privatisation off Saudi Aramco but I'm not sure why anyone would want to be a minority shareholder in that - I can't imagine they'd take those shareholders rights and desires much into consideration when setting strategy as it's essentially a political tool of the ruling family - but I guess it'll raise some cash.

The problem though is the budget. They're proposing to sell off the family silver to pay down their over draft,mbut they're still running a massive budget deficit, and the overdraft will simply grow back.

There needs to be massive change, and it'll hurt. But less than the alternative which is to hold on as long as possible and then implode spectacularly.

On the plus side, Russia is probably in a worse position as they are also under sanctions and so have next to no access to western capital markets to help plug the gaps.

Stay away from both.

Tax. Cameron

So Cameron is now publishing his tax returns to try to quash the "Panama Papers" scandal surrounding him.

Surely the point of offshore funds and tax evasion is that any dodgy deals he may have done wouldn't be in his tax records anyway, so publishing them proves nothing. 

Russia

So Putin is pulling his army out of Syria after 5 years because his aims have been "largely achieved". And conveniently at the same time as he needs to slash his spending because of the collapse of the oil price and his budget being a fantasy.

Coincidence? Methinks not. I smell the whiff of panic setting in. 

HSBC

So HSBC has decided to rebrand it's UK bank from HSBC to HSBC UK. And apparently they paid money to an agency to come up with that!

They considered reviving the name Midland from the bank they bought 20 years ago but it seems that they were worried it "lacked dynamism". Surely a supposedly ultra-safe ring-fenced retail bank isn't supposed to be dynamic. It's supposed to be a boring place which isn't going to lose your money. I'd have though Midland was the perfect name for it.

Volatility

Well it's been a bouncy couple of weeks but slowly a sense of calm seems to be returning to most markets. 2 months ago it was agreed the Chinese stock market was in a bubble, so quite why the bursting of that bubble came as such a shock I'm not sure. But the bigger question to my mind is quite why so many markets moved so far and so fast.  The FX liberalisation certainly didn't help - it was interpreted by many - probably incorrectly - as a devaluation and as such a sign that the Chinese economy is in dire straits. While I agree with the sentiment re the economy I don't think that they were aiming for a devaluation. Firstly there's the "face" involved in admitting your economy is so screwed you need to devalue, and secondly I just don't think they're that bright.

But back to the moves......  I believe there are 2 factors contributing to the violence of recent moves. Firstly - the typical illiquidity of August when half of the city's traders and fund managers are on the beach. And secondly I think the blame can be partly ascribed to the regulators and their wonderful new capital rules. 

Banks simply don't want to hold assets on their balance sheets. Inventories are kept to a minimum, and money is made on the buy/sell spread of put through rather than positioning. This is worse in the summer when the managers are away and the juniors are terrified of being left holding the baby in a falling or rising market. Thus when faced with a wave of buyers or sellers they will move prices far and fast in order to find keen buyers or sellers on the other side. To make matters worse, the new market makers are in many circumstances hedge funds. These guys are not worried about customer relations, or regulator oversight, so they can be as aggressive as they like in their pricing. Having prices gap higher or lower doesn't bother them, and they love volatility as it allows them to pick up very underpriced assets and sell very overpriced assets. They have little incentive to calm markets. Volatility is their friend.

I believe these factors apply in all markets, and the volatility in equities, bonds and commodities over the last few weeks can be largely attributed to that. Now that the banks few remaining big swingers are back at their desks, and hopefully have brought their trading balls with them, liquidity might start to return and the volatility of recent days will fade. If not regulators might need to rethink some of their new rules.